UPS to charge by size for US ground packages

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United Parcel Service, the world's biggest package delivery company, said it would start charging by size of packages for all ground services in the United States as it looks to offset rising fuel costs.

Rival FedEx made a similar move in May, which had analysts speculating if UPS would follow suit and start charging by size, instead of weight alone.

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The logistics giants have been struggling with high oil prices, which jumped to nine-month highs last week as concerns mounted that escalating violence in Iraq could disrupt oil supplies.

The new pricing will add to shipping costs for online retailers such as and eBay as they will have to pay more to ship items that are bulky, but not necessarily heavy, such as diapers and large soft toys.

"The 49 cent toy that's 3 feet tall and requires a big box probably doesn't get shipped anymore,'' Sanford Bernstein analyst David Vernon told Reuters.

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UPS's new pricing, which will be implemented from Dec. 29, will also include packages to Canada, the company said.

UPS said the change in pricing would reduce overall package sizes and the use of excess packaging materials, leading to lower fuel use, vehicle emissions and transportation costs.

The company already charges by bulk, in addition to weight, for air shipments and ground packages to Mexico and Canada measuring 3 cubic feet in size or larger.

Both UPS and FedEx shares were little changed.

By Reuters